so: i’m a canadian living abroad but get paid and keep my money at home. i’ll be getting a few cheques in the next week or two and would like to do something productive with them. ideally, i’d like to invest $10 000, though it might end up being less than that, depending on how my (extremely unpredictable) life pans out in the next year. i’ll probably need to spend most or all of that money next year, so the term would be something like 6-12 months.
right now, i’ve got a president’s choice savings account. interest used to be 4%, but it’s now down to 2.75%. it has the bonus of being free and instant to shuffle around online and i switch it to chequing to draw cash from ATMs worldwide if i want. it can also be tax-free under the new rules.
i was looking at things like GICs etc through TD bank, but it doesn’t seem like they can even match 2.75%, at least not for a few years. is the PC still my best bet? other options?
my story: i’m a 29-year-old, single, don’t own a home or car, no debt, some savings. i’m a doctoral student and tuition hovers around $7100/year; should have one year left. my dad has power of attorney over my TD chequing account, so he could set up and shuffle things for me; otherwise all my banking’s online.
what about the new tax free savings accounts they introduced this year. You can put up to $5000 pr/yr into it and any growth is tax free. You can also take the money out at any time without any penalties or requirements to pay it back like you do with an RRSP. It’s not just a straight savings account as you can invest the money a number of different ways.
definitely looking at going that route! i already have some money in a PC savings account that will be transfered to ‘tax free,’ so that’ll use up my $5000 for this year already, i think. so i still need a strategy for the rest of it!
Pretty much anything can be put in an RRSP, so buy your GIC or whatever (I don’t think your savings account will work) and take the tax break. If you made enough in 2008 you could claim it on your 2008 income tax. Then when you need to spend it in 2009 you will have to take it out and pay tax on it plus any interest/cap gains. I’m assuming that you will use it to pay tuition so you should have a low enough income that you won’t really get hit by the taxes on removal (the removal is counted as regular income).
FYI: I’m no financial guru, or tax accountant so tax this for what it is. The only advantage to the RRSP route is that if you had a high enough income in 2008 to pay taxes you will save some if you didn’t, there is no real advantage that I can think of.
yeah, that’s sort of the thing - most of my income is grants/scholarships, which aren’t taxed anyway. plus with all the tuition credits i’ve got, i don’t really have to worry too much about getting under the income tax wire for at least another year or two.
There’s a message board called the Financial Webring Forum at http://www.financialwebring.org/forum/index.php that is focused on Canadian financial planning and investing. If you repost your original post over there in the “Starting out on the Right Track” forum you should get plenty of educated answers.